June 16, 2009
I suggest that when directors are compensated with stock either via direct share awards or option grants, that both directly awarded and option exercized shares be restricted from immediate sale and that minimum time limits be set for holding period. This is needed to prevent the "options rolls" and immediate stock sales upon awards which in essence allows directors (and company executives) to supplement cash compensation without earning any equity. Such practice has become widespread and leads too often to a conflict of interest between shareholders and board and thus also the management. My view is that directors have a fiduciary responsibility to their constituency who elect them upon nomination and therefore, directors should also have some minimum equity.
I further believe that there should be term limits to directors for the same reason as there are term limits for publicly elected officials. There are entirely too many directors who seem to become "directors for life" since the founding of the company eventually becoming ineffective providing little if any meaningful input and "stooges" for the executive management. This prevents fresh ideas and leads to excessive power concentrated in the executive suite all of which too often is adverse to shareholder interests. Rules should be created to limit terms with exceptions only under the most unusual circumstances.
Finally, I recommend that this matter be related to the "Going Dark via Form 15" process as that can undermine your efforts by allowing public companies to nearly totally escape regulations. Reference is made to the two companies I jhave cited in this context whereby one filed form 15 based on 276 shareholders of record when they in fact had 9,500 actual shareholders.
I believe that both of these actions would enhance shareholder confidence in our system of public corporations and regulators thereof.